Morning Comments - Beginnings of a pre-report bounce?

Rather limited news as we began the trading for this new week with the Sunday night session but we are experiencing a rebound in prices nevertheless. Wheat still remains with the trading range that we have been developing over the past couple weeks but is already pushing against the upper end.

There is growing discussion of the poor quality of wheat across Europe with the wet late season conditions. Eventually this could push a little demand for food quality wheat to the US, but overall it should not be a real price mover. We still have quantity and this would mean they should feed all the more wheat, which is a drag on both wheat and corn markets. In the mean time wheat from the Black Sea should dominate the world trade as the Ukraine and Russian harvests move forward with solid crops particularly for Russia.

As I stated previously, the strength overnight has already pushed wheat up against recent overhead resistance, which in the December contract sits at 5.65. If we can poke through that level on a close it should open the door for a bump up to at least 5.84 and possibly the 5.95/6.00. With the market leaning heavily to the short side, it would not be unreasonable to catch a short-covering bounce into the August 12th report.

Corn

The corn market is also experiencing a very minor bounce during the overnight trade to start this new week but the key word there is minor. At this point, December futures have barely made it back to what had been the contract low before Friday at 3.64 ¼.

The weather outlook and the upcoming report will most likely be the focus during the next week and of course neither can be predicted with any amount of certainty. I happen to be out in the eastern part of the country this week where it is raining and the corn that I have seen out here looks much like what I have witnessed in the Midwest; green and lush. Weather runs from last night indicate that the majority of the middle of the country is in line for moisture through the next week and that temperatures should remain normal to below normal. That would suggest that the strength witnessed in the overnight trade then is due to the oversold position of the market and a willingness of the shorts to take a little risk off the table in front of the report. I suspect crop rating this afternoon could reflect a slight deterioration.

More estimates are beginning to be published as Friday the Linn Group issued and estimate for corn of 172.8 for a crop of 14.53 billion bushels. It would appear that the trade is becoming a bit accustomed to numbers this large. It is difficult to believe that the USDA will not bump the estimates higher next week but seeing this is not truly a physical measurement you have to suspect they will be somewhat conservative.

Large managed money remains long in the corn market which is probably somewhat offset by their short in wheat but this being the case, the corn market would seem to be the least likely to witness much short-covering prior to the August 12th reports. A hiccup in the weather could still provide an interesting day or so of action but overall you have to believe that strength will be brief and that lower lows lay ahead.

Soybeans

November beans finished last week in dangerous territory as we sat right on top of the July 23rd lows and posted the lowest weekly close today. This left us susceptible to a gap and go break down for the new week but that turned out not to be the case. We did click into a slightly lower low but evidently found no additional sell stops and have posted a somewhat meager bounce since then.

If there is to be any uncertainly and hence volatility in the weeks ahead it would only stand to reason, it will be in this market. We have finally entered the key month for crop development and another shot of rain could certainly go a long ways to help with pod fill. The updated runs on Sunday night suggest that should be the case for a nice portion of the Midwest and upper Midwest.

The Linn Group issued a bean estimate of 45.8 b/p/a, which was almost identical to the Doanes estimate of 45.9. Of course both are above the last USDA number of 45.2, which in itself is already a record and of course on record acreage to boot. This should be even more of a statistical report than corn as with the former, they will pull back ears that are formed, where in beans there is little to actually measure at this time. I would expect crop conditions to be unchanged to possibly a bit lower.

Now that we have pushed down to the low side of the trading range and held so far, with a week yet before the reports it would not be unexpected to see a push back against the upper end of the range. If that is correct, we had better find something supportive in the report or in weather developments or I suspect that then next time down, it could be for the count.